Bank Loan on a Rental home

4 Replies

I am thinking about purchasing a home. Initially I thought about using it as a primary home however, now I am thinking about using it as a rental. Would the bank know I am using it as rental if I got the loan with plans to use as a primary residence?

Well if your finance is based upon you living there the terms of loan are less stringent than an investment property. If this was an owner occupied homepath loan and you decided to rent it out, that would be a violation of the contract and you could face criminal charges.

How long you have to hold it as what you initially declared is a grey area except for FHA and VA loans which state you must hold it as a primary residence for a minimum of 1 year. The conventional loan documents only state if you declare primary residence that you have to move in within 60 calendar days. On conventional there is no black and white as long as you intended to live there as a primary residence but I always recommend to atleast file 1 years tax return at the primary address so you have some documentation of adhering to what you originally signed up for.

If you rent it out right away after buying as primary then you may have some issues, legal and ethical.

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If you get a owner occupied loan (lower down payment, lower rate) then plan to move in.  If you plan to rent it, get a non-owner occupied loan.